Hi Question asks to explain why large claims will almost certainly disturb run-off pattern whereas cat losses is uncertain. Answer lies in whether the payment pattern for cat losses resembles the "normal" pattern. Does this means that if large claims also follow "normal" pattern, the run-off pattern is unaffected? Thanks.
the problem is that large claim cannot follow a 'normal' runoff pattern, since we assume (almost by definition) that there are few of them. a cat event does not cause one huge claim, but a very large number of mostly small claims. These will be paid off gradually over a period of time, so may follow a fairly smooth development pattern similar to the 'normal' development pattern. however, since we assume there are just a few large claims, and that these are generally paid in a single payment (or mostly), then the development pattern will necessarily be very 'lumpy', so can never follow a gradual/smooth pattern that you would 'normally' pattern.
